Who Won The Smartphone Wars: Google Or Apple?

Last week, an Oracle lawyer said in court that Google had made $31 billion in revenue and $22 billion in profit from Android, according to Bloomberg. ~ Miguel Helft

(T)he comparisons between Google’s Android business and Apple’s iOS business that are starting to surface (Apple generated $32.2 billion in iPhone sales in the most recent quarter), well, they don’t mean much either. Apple sells mostly hardware. Google sells mostly ads. Those are fundamentally different businesses. Both companies are very successful at what they do. ~ Miguel Helft

I could not disagree more.

Congratulations On Making Money

I want to congratulate Google on making any money at all on Android, let alone ~$22 billion in profits. As they used to say: A billion here and a billion there and pretty soon you’re taking real money. ((Senator Everett Dirkson))

Congratulations On The Pivot

Google doesn’t get enough credit for the amazing pivot they made with Android. Google purchased Android in 2006 with the intention of competing against Blackberry and Microsoft. When they saw the iPhone in 2007, they went back to the drawing board and by 2008, they were ready to introduce a revamped Android operating system that could compete head-to-head with the iPhone and its iOS operating system. It was an amazing achievement.

Compare that to Microsoft, which moved much, much more slowly and didn’t introduce a competing smartphone operating system until 2009. By then it was too late. The iPhone took the high end of the market, Android took the low end and there was just no room for Microsoft’s entrant to grow and prosper.

There is an immeasurable distance between late and too late. ~ Og Mandino

Congratulations On Achieving Your Primary Strategic Objective

Any money that Google makes form Android is a bonus because money was never Android’s primary objective anyway.

Android’s immediate objective was to keep Microsoft from dominating mobile the way Microsoft had dominated the desktop. Android’s long-term objective was to prevent Google from being locked out by platform owners. In the latter case, Apple’s app ecosystem proved to be surprisingly troublesome. However, in the short run, Android was an unconditional success. Not only was Microsoft prevented from dominating the nascent mobile marketplace, the entire foundation of Microsoft’s personal computing business model was undermined.

The highest realization of warfare is to attack the enemy’s plans. ~ Sun Tzu

Before Android, there were two viable business models in personal computing: licensing an operating system for profit and device sales. After Google began to give Android away for free, Microsoft’s licensing business model was unsustainable.

Congratulations On Not Losing

Google has made an estimated $22 billion in profits over the lifetime of Android.

The iPhone, on the other hand, has generated more revenue in the past three months than Android has in its entire existence. Further, it’s been estimated that the iPhone has made around $500 billion over its lifetime.

First, as Benedict Evans, Horace Dediu and others are fond of saying, unfair comparisons are often relevant comparisons. The goal of business isn’t to be fair, it’s to win.

If you’re in a fair fight, you didn’t plan it properly. ~ Nick Lappos ((The Military Quotation Book by James Charlton))

Second, what the heck makes Miguel Helft think that you can’t compare Apple and Google just because they have two different business models? Almost every business, in almost every market sector, has a different business model. That’s how they compete.

Was it unfair to compare Microsoft’s very successful software licensing business model to Apple’s mostly unsuccessful integrated hardware and software business model in the 1980’s, 1990’s and 2000’s?

Hell no!

(T)racking precisely how well Apple and Google’s mobile platforms are going has ceased to be very interesting. They both won, and both got most of what they wanted, more or less, and at this stage iPhone or Android phone sales announcements are really just victory laps. ~ Benedict Evans

Well, yes and no. It’s certainly true that Google didn’t lose the Mobile wars (as opposed, say, to Motorola, Microsoft, Palm, Sony, Rim, etc.) And $22 billion in profit moves Android firmly into the winner’s column. But Android was primarily a defensive play. Google’s objective was to not lose. That’s why making $22 billion in profit is so sweet. But $22 billion doesn’t compare to the $500 billion the iPhone made. Apple was the clear winner here…and it’s not even close.

Cloning The PC Wars

With its disruptive and leveraged strategy, it is Google that is attempting to be the Microsoft of the smartphone market. Perhaps ironically, Apple is well positioned to be the “Apple” of the smartphone market. ~ Bill Gurley, AboveTheCrowd.com, 5 January 2010

The pundits had it half-right, which meant they had it all wrong. They opined that Google was the new Microsoft and Apple was the new Apple. Google was the new Microsoft alright, but Android was not the new Windows. And Apple was the new Apple, but the iPhone is not the new Macintosh, it’s the new Windows.

How can I make such an outrageous claim? The proof, as they say, is in the pudding.

Google pays billions to Apple to make its search engine the default search provider for iOS devices, the company collects much more from ads placed on Apple devices than from ads on Android devices. A recent analysis by Goldman Sachs estimated that Google collected about $11.8 billion on mobile search ads in 2014, with about 75 percent coming from ads on iPhones and iPads. ~ Farhad Manjoo

The iPhone is the new Windows because everyone — Google and Microsoft included — has to develop for it. Google needs Apple’s mobile platform. And Microsoft needs Apple’s mobile platform. But Apple doesn’t need Google or Microsoft’s platforms. The smartphone wars are over. Apple won. Microsoft lost. Android placed.

Conclusion

It may sound like I’m denigrating what Google’s Android has accomplished. Nothing could be further from the truth.

Android absolutely and overwhelming achieved its strategic objective. It gutted Microsoft’s business model and provided Google with access to the then burgeoning mobile marketplace.

But, let’s keep things in perspective. Just because Google won with Android, doesn’t mean it won nearly as much as Apple did with the iPhone. Android kept Google from being locked out of mobile. With the introduction of the iPhone, Apple went from being just another fortune 500 company to one of the largest, most successful companies in the free world. If that ain’t winning, what is?

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?